Banking IT spends have slowed down: Cognizant

Cognizant president Gordon Coburn talks to TOI about the concerns in banking & finance and healthcare that pushed the company to lower the upper of its full-year revenue guidance.You have lowered the upper end of your full-year guidance.

Updated: May 09, 2016, 12:37 IST

Bengaluru: Cognizant president Gordon Coburn talks to TOI about the concerns in banking & finance and healthcare that pushed the company to lower the upper of its full-year revenue guidance.

You have lowered the upper end of your full-year guidance. What are the new concerns?

It was driven by the first quarter, where we were within our guided range, but at the lower end of it. We are quite pleased with the expected second quarter growth. But given our performance in Q1, when we looked at what it would take sequentially to get to the high end of the range, we decided to tighten it.

The lower guidance indicates that Infosys could get the better of you in terms of annual growth for the first time in over 13 years…

It's tough for us to comment on competitors. Some of our comparables are much more difficult than that of some of our competitors. When I look at the sequential growth that's expected, we would be one of the leaders this year. When I look at dollar growth in Q2, I'm pleased with what we will accomplish relative to the industry.

The softness in Q1 is largely driven by financial services, particularly by larger banks, as well as healthcare, particularly the four companies that are going through potential mergers. We expect to return to sequential growth both in financial services and healthcare. We have a fairly big exposure to European banks and they are having challenges now. US banks anticipated that the interest rates might move back up a bit this year, and that would have been good for the banks. But that hasn't happened. Also, financial market volatility in the first quarter caused people to defer spending. In Europe, there's concern about the economy and what may happen on the UK and EU (the UK referendum on remaining with EU).

You mentioned merger related concerns in healthcare. Can you elaborate?

In healthcare, there are two large mergers that have been announced and these have been going through the approval processes. We do a lot of work for the buyers and sellers in those mergers, and during the approval process time, there's a slowdown in spending because it's not clear which system will survive. We will get a lot of integration work once the mergers are approved.

We invested heavily in these areas to get to critical mass. And particularly in BPS and infra, once you have scale, it's easier to win larger deals and we are now at an inflection point where we have massive scale and incredibly deep process and industry knowledge. The investment strategy is playing out exactly like we anticipated – invest heavily and get critical mass and that will drive healthy growth.